My New Hobby – Watching My Home Value Decrease

Recently I’ve picked up a new hobby. It’s probably not one that others would like to have. A few weeks ago, my Bank of America Online account started offering a new feature called Zestimate, from Zillow.com bundled into its’ on-line portfolio section.

If you’re already a BofA customer with online access, you probably know about the portfolio management feature. For those that don’t, the My Portfolio is a section where you can register all your outside credit cards, investment accounts, Reward points programs, etc. to give you a one-stop view of your financial situation. Pretty nice.

The newest addition is a section called ‘Real Estate Center’ which lists an option to track the estimated value of your home on a day-to-day basis. This service, offered by Zillow.com, calculates the fair market price (roughly) of your home, based on a database of similar homes in the area, and the prices they’ve been offered for or sold at recently.

Race to the Bottom

After setting up the home name and listing the address, zip code, and such, you’re ready to have Zestimate start estimating the value of the house. I live in a modest 3 bedroom 2 1/2 bath home in a decent Midwest neighborhood. The original price a month and a half ago was $185k.

As of this morning, the Zestimate amount has dropped to $172,500. This is averaging around $500/day decrease.

The saddest part of all this? I can’t stop watching! It’s like driving by a car wreck. You don’t want to look, but you can’t help but stare. As a people, we’re fascinated with disasters, and my home value going down at this rate, definitely qualifies as a disaster in my book.

Now, I have nothing against Zillow or their tool. On the contrary, it’s a great wake-up call for people wanting to sell their home, but think they’re going to get top-dollar for it like they could have a year or two ago. Housing prices continue to be in free-fall, and there’s an estimated 2-4 million people facing foreclosure in the next year if congress doesn’t provide some sort of assistance.

‘POP!’ – Facing the Housing Market Readjustment

We’ve still got a ways to go before the house prices re-adjust themselves back to where they were, pre-housing bubble. It’s like lancing a boil; It’s going to really hurt at first, but it’ll feel better after it’s done. Of course that’s no consolation to those facing hard choices of whether to try to save their homes, or allow them to go to foreclosure. But at some point, housing has to return to something approaching ‘affordability’.

Many of the investors in real estate and the ‘living large’ crowd are going to see those investments dry up and blow away (if they haven’t already). But those same homes can then be re-cycled through the financial system and sold at a more realistic price to people that will buy them as primary residences, instead of speculative investments. The dream of home ownership isn’t dead, just injured.

It may take a couple of years (or more) but eventually we’ll be back to where buying a home is again affordable, credit is available for qualifying buyers, and there’s a supply of good homes ready to accept new families. It’s just a matter of time.

Is your home decreasing in value? Are you upside down in your home? Tell us your story by leaving us a comment!

I am currently away on vacation and Randall from CreditWithdrawal.com volunteered to write a guest article for Cash Money Life. Randall writes about not relying on credit, the economy, and other personal finance topics. For more articles that help you end your credit addiction, visit his blog or subscribe to his RSS feed.

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You have to take those estimates with a grain of salt. Zillow was telling my my home was worth about 165k since it had the wrong information. It has since been corrected and is telling me my house is worth about 199k which is more like it. I think that is a little high but since I am not planning to sell anytime soon, it doesn’t matter.

In the first place, Zillow is not accurate. In the second place, “Zestimates” are solely based on comps, which in this instance are not comps: it takes the prices of auctions on the courthouse steps as the same as sales of clean, well maintained houses; and this skews the weight of the actual resale prices that speculators get when they turn the places around.

The shack across the street from me, which was a certifiable dump, sold for $152,900 (vs. the $235,000 I paid for mine, which at one point was laughably valued at $375,000 and is now more realistically worth about $290,000). The bottom feeder who grabbed it sold it for $175,000. The speculator who paid that came in and cleaned out the mess, replastered the pool, installed a watering system, cleaned up the landscaping, had the house painted inside and out, put down new tile and carpeting, redid the kitchen and bathrooms, and now has it on the market for $269,900. If she gets $260,000 for it — which she will — my house’s value not only has NOT dropped below what I paid, it probably has increased in the absence of a slum property across the street.

So… a) it’s bull puckey; and b) we can’t do anything about it anyway, so we should find something we actually can help to worry about.

Funny About Money: The stock market is similar – it’s all unrealized gains and losses until the asset (stock or other property) is sold.

You’re right, people should worry about things they can change, or that are currently affecting their way of life. but it’s also good to keep tabs on property values, and using Zillow can be a decent tool to do that. But there are no hard and fast values for the property market, so relying on one source may not be the best way to go.

Based on my own comp estimates Zillow is still overvaluing my house. It agrees I’m underwater, but not by much. Looking at actual sales in my neighborhood, that number is over $100k. Whether a house is a dump or not is a different issue than how it was sold.

Um ya, I just received my ‘Notice of Valuation and Classification’, and my assessment for 2011 went down by 45% from 2010. Seriously? So I went from having a nice chunk of equity in my home to owing more than I can sell it for in 1 year. It kind of snorks me off, considering that I know this is because there have been 3 homes in my neighborhood have gone into foreclosure in the last year. So, I’m being punished for my neighbors’ inability to pay their bills, regardless of the fact that I haven’t missed a payment in 10 years? I can’t even try to spell the noises coming out right now!

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